Yaq,Not that one should take too much issue with anything from...

Yaq,

Not that one should take too much issue with anything from the "Money morning" as it is really just an advert for Port Phillip Publishings investment articles; but in context the above example could be expressed a different way:

40% tax on $580,000 is $212,000. That is 2% of the gross revenue for the said company. I expect that some common sense will be inserted back into the argument after some modelling is carried out.

So based on the above, lets scrap together some very rough if not dirty numbers on an LNG exporter:

$3,000m LNG terminal for 3mtpa with $1,500m drilling and pipeline expenses?
6% set govt return = $270m
Revenue from operations is $1,755m
Cost of operations $4/GJ
Profit BT = $975m
Taxable Profit = $705m
RSPT = $282m

Now the margin between the company tax and the rebate would have to be added in here to make a true comparison, but I guess from a long way away, it doesnt look like a death nell to me.

Especially when you consider that countries are investing in LNG, not necessarily to make a buck, but to secure energy supply. I am sure that cheeky Rudd knows this as well.


The REAL risk here is that companies seeking higher rates of return will take their business elsewhere - it is not that companies will not be getting NIL return on their investments - frankly, these still have the potential to be quite substantial.

When you consider a business such as CSG or LNG > the high capex could very provide some considerable protection from getting stung overly by the RSPT, and if you do get near it, then so what, you are still making money.

But we are talking risk here anyway right? That means that it is not material. The markets very inappropriate treatment of the risk as material is of more interest.

BOW and ESG were put to the sword >> I can do nothing but smile knowing that I have placed my money well in each of these as clearly the market also understands that these are the companies with the highest prospectivity, best location tenements in the country that will most likely be sought to fuel hungry gas projects.

So really, how much will the RSPT affect these projects, and how likely is it that the RSPT will get through?

On balance, I cannot call the markets reaction and inappropriate - both BOW and ESG are built on blue sky. Prospectivity! So I cannot complain about the corrections for this is what my vice brings me.

A smug, if not arrogant ESG and BOW holder :)

SF